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Price skewness and the marketing of finished cattle

Author

Listed:
  • C. Jack

    (Department of Agricultural and Food Economics, The Queen's University of Belfast, Newforge Lane, Belfast BT9 5PX, Northern Ireland)

  • S.A. McErlean

    (Department of Agricultural and Food Economics, The Queen's University of Belfast, Newforge Lane, Belfast BT9 5PX, Northern Ireland)

  • D. Anderson

    (Department of Agricultural and Food Economics, The Queen's University of Belfast, Newforge Lane, Belfast BT9 5PX, Northern Ireland)

  • T. McCallion

    (Department of Agricultural and Food Economics, The Queen's University of Belfast, Newforge Lane, Belfast BT9 5PX, Northern Ireland)

Abstract

Incomplete information about product quality generates risk for market participants. The amount of information and perceived risk varies between marketing channels and an agent's attitude to this risk influences their choice of marketing channel. For risk-averse sellers, expected price and the associated price risk (dispersion) are relevant to their choice of marketing route. This paper examines how the choice of marketing channel by farmers selling finished cattle is influenced by their perceptions of expected market price and price variation. The study uses a unique dataset of “matched” animals, sold first in liveweight auction markets in Northern Ireland and subsequently to a meat packer. The findings indicate that price skewness also influences channel choice. The positive skewness exhibited by auction market prices combined with the negative skewness exhibited by meat packer prices may mean that some risk-averse individuals, faced with incomplete information about product quality, prefer the liveweight auction market to selling directly to meat packers [JEL Codes: Q110]. © 2000 John Wiley & Sons, Inc.

Suggested Citation

  • C. Jack & S.A. McErlean & D. Anderson & T. McCallion, 2000. "Price skewness and the marketing of finished cattle," Agribusiness, John Wiley & Sons, Ltd., vol. 16(4), pages 471-484.
    • Handle: RePEc:wly:agribz:v:16:y:2000:i:4:p:471-484
    DOI: 10.1002/1520-6297(200023)16:4<471::AID-AGR6>3.0.CO;2-K
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    References listed on IDEAS

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    1. Machina, Mark J, 1982. ""Expected Utility" Analysis without the Independence Axiom," Econometrica, Econometric Society, vol. 50(2), pages 277-323, March.
    2. Joseph Golec & Maurry Tamarkin, 1998. "Bettors Love Skewness, Not Risk, at the Horse Track," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 205-225, February.
    3. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
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    Cited by:

    1. Andreas Tsakiridis & Michael Wallace & James Breen & Cathal O'Donoghue & Kevin Hanrahan, 2021. "Beef quality assurance schemes: Can they improve farm economic performance?," Agribusiness, John Wiley & Sons, Ltd., vol. 37(3), pages 451-471, July.

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